Market Structure
Lot
The standard unit of trade size in forex, measured in units of the base currency.
What Lot means
A lot is the packaging unit for forex position size. One standard lot is 100,000 units of the base currency, a mini lot is 10,000 units, a micro lot is 1,000 units, and some brokers offer nano lots of 100 units. Platforms normally express size as a decimal multiple of a standard lot, so 0.10 means a mini lot and 0.01 a micro lot. Because lots are denominated in the base currency, the dollar notional of one lot differs from pair to pair.
Lot size drives everything downstream: the notional exposure, the margin required, the value of each pip and the size of the overnight swap. Position sizing therefore starts from the money you are prepared to lose and the distance to your stop, and solves backwards for lots, rather than picking a familiar size out of habit. Remember that lot conventions differ for non-forex CFDs, where one lot might be 100 ounces of gold or a single index contract.
Worked example
Risking 200 US dollars with a 40 pip stop on EUR/USD implies a pip value of 5 US dollars, which is 0.50 lots, or 50,000 euros of notional exposure.
Related terms
- Standard LotA position of 100,000 units of the base currency, the benchmark trade size in forex.
- Mini LotA position of 10,000 units of the base currency, one tenth of a standard lot.
- Micro LotA position of 1,000 units of the base currency, one hundredth of a standard lot.
- Contract SizeThe number of units of the underlying instrument represented by one lot or one contract.
- Position SizingThe process of choosing how many lots to trade so that a losing trade costs a predetermined amount of capital.
Frequently asked questions
What does Lot mean in forex trading?
The standard unit of trade size in forex, measured in units of the base currency.
How does Lot work in practice?
Lot size drives everything downstream: the notional exposure, the margin required, the value of each pip and the size of the overnight swap. Position sizing therefore starts from the money you are prepared to lose and the distance to your stop, and solves backwards for lots, rather than picking a familiar size out of habit. Remember that lot conventions differ for non-forex CFDs, where one lot might be 100 ounces of gold or a single index contract.
What is an example of Lot?
Risking 200 US dollars with a 40 pip stop on EUR/USD implies a pip value of 5 US dollars, which is 0.50 lots, or 50,000 euros of notional exposure.
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